FITUG e.V. Förderverein Informationstechnik und Gesellschaft

FC: E.U. will tax offshore digital sales; restrictions on journalists

------- Forwarded message follows ------- Date sent: Wed, 8 May 2002 02:55:14 -0400 From: Declan McCullagh <declan@well.com> To: politech@politechbot.com Subject: FC: E.U. will tax offshore digital sales; restrictions on journalists Send reply to: declan@well.com

This is, in a word, silly. The E.U. explicitly recognizes that it won't be able to compel firms in U.S. or any other non-European country to voluntarily start charging taxes on purchases or downloads sent to Europe.

Let's take it as a given that the E.U. can compel some U.S. firms to collect VAT for purchases of digital content where the customer is known to be inside the E.U. That would appear to be the case when the U.S. firm has a physical presence or business arm inside Europe (Yahoo France, Terra Lycos, etc.). But if not? The Eurocrats are plain out of luck.

A EuroFAQ admits this, and hopes for voluntary compliance:

http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&do c=MEMO/00/31|0|AGED&lg=EN&display= >"Legitimate operators certainly do not want to give credence to the >idea that Internet is a zone where laws do not apply - the incentive >to voluntary compliance should not therefore be underestimated."

See also: http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&do c=IP/00/583|0|AGED&lg=EN&display= >"Stated simply, electronically delivered services for consumption >within the EU will be subject to VAT, whilst those for consumption >outside the EU will not be subject to VAT."

Talk about giving a competitive advantage to small offshore firms that can thumb their noses at silly E.U. directives...

Previous Politech message:

"Council of Europe on May 14 debates limiting media, speech" http://www.politechbot.com/p-03437.html

-Declan

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http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&do c=MEMO/02/89|0|RAPID&lg=EN;

_________________________________________________________________

Preparation of Eurogroup and Council of Economics and Finance Ministers, Brussels 6-7 May 2002 _________________________________________________________________

DN: MEMO/02/89 Date: 06/05/2002 TXT: EN PDF: EN DOC: EN MEMO/02/89

Brussels, 6 May 2002

Preparation of Eurogroup and Council of Economics and Finance Ministers, Brussels 6-7 May 2002

(Gerassimos Thomas & Jonathan Todd)

[...]

The biannual Macroeconomic Dialogue meeting will take place at 17h30 on Monday 6 May. Eurogroup Finance Ministers are due to meet in Brussels at 20h00 on Monday 6 May. The EU's Council of Economics and Finance Ministers will start on Tuesday 7 May at 9h30. The European Commission will be represented by Economic and Monetary Affairs Commissioner Pedro Solbes and Internal Market and Taxation Commissioner Frits Bolkestein. A press conference by the Presidency and the Commission will take place at the end of the Council meeting in the afternoon.

[...]

The Council is expected to agree that the situation of journalists in connection with the dissemination of false or misleading information would be assessed taking account of existing national legislation on the press and freedom of expression, unless the journalists involved in disseminating the information knew or ought to have known it was false and they derive advantage or profit from it.

[...]

Over the Ministers' lunch on 7th May, the Presidency wishes to explore possible Community action on money remittance systems and wire transfers, following Special Recommendations on terrorist financing from the Financial Action Task Force on money laundering (FATF see http://www1.oecd.org/fatf/), the international organisation dealing with this issue. FATF set June 2002 as the deadline for implementation of its Recommendations.

The second EU anti-money laundering Directive, adopted in December 2001 (see IP/01/1608), envisages a third such Directive in due course. These matters could potentially be covered in that Directive if the FATF process points to the need for Community action. Supervision of financial institutions: EFC mandate (JT)

During the Ministers' lunch on 7th May, a possible mandate for the EU's Economic and Finance Committee (EFC) to consider the issue of the supervision of financial institutions is due to be discussed, together with how this could be linked with the mandate given by the informal meeting of Finance Ministers in Oviedo in April 2002 for the Commission to suggest appropriate arrangements for such supervision. VAT on electronically delivered services (JT)

The Council is due to adopt definitively, without discussion, a Directive and a Regulation to modify the rules for applying value added tax (VAT) to certain services supplied by electronic means as well as subscription-based and pay-per-view radio and television broadcasting. The new rules, based on Commission proposals of 7 June 2000 (see IP/00/583 and MEMO/00/31), will create a level playing field for the taxation of digital e-commerce in accordance with the principles on the taxation of e-commerce agreed at a 1998 OECD Ministerial Conference. The rules will ensure that when these services are supplied for consumption within the European Union, they will be subject to EU VAT, and that when they are supplied for consumption outside the EU, they will be exempt from VAT. The changes modernise the existing VAT rules to accommodate the emerging electronic business environment and to provide a clear and certain regulatory environment for all suppliers, located within or outside the EU. The rules also contain a number of facilitation and simplification measures aimed at easing the compliance burden for business. Member States must implement the new measures by 1 July 2003.

The Council already reached political agreement on the Commission proposal on 12 February 2002 (see MEMO/02/22). However, formal adoption by the Council had to await the opinion of the European Parliament on the Regulation that establishes the procedures for co-operation between Member States' VAT authorities and for revenue-sharing.

[...]

Energy taxation (JT)

Ministers are due to consider guidelines drawn up by the Spanish Presidency which are designed to give a clear direction to further work on the details of the proposal for a Directive on the taxation of energy products on the basis of the Commission's 1997 proposal (see IP/97/211). The guidelines deal in particular with: * the principle that energy products are to be taxed only when intended for use as motor or heating fuels * the possibility of applying a lower tax rate to business use of energy products than to household use * the application of tax reductions for particular areas of production, such as for energy-intensive businesses, or where agreements have been reached with businesses which lead to achievement of environmental protection objectives or improvements in energy efficiency * the principle of allowing greater flexibility than under the present procedure, so that each Member State can introduce tax differentials for particular areas, such as local public transport or diesel used as a propellant * the minimum levels of taxation of energy products already subject to harmonised excise duties and of those not yet subject to harmonised excise duties.

Commissioner Bolkestein will welcome the Presidency's efforts to broker a compromise on this difficult issue and will give his broad support to most of its proposals although some further technical work is necessary on some points. He will particularly welcome the Presidency's explicit proposals concerning minimum rates, which have not been addressed in detail in the Council up to now. However, Commissioner Bolkestein will state his opposition to the Presidency's proposal for a permanent tax differentiation for diesel used as propellant by the goods and passengers road transport industry. The divergent national excise duties applied to diesel used by the road haulage sector lead to distortions of competition in the internal market. A permanent differentiation in favour of road hauliers defined at national level would not resolve the problem and would therefore be unacceptable to the Commission. Commissioner Bolkestein will announce that the Commission services are working on a proposal for a Community Directive aimed at ensuring in the long term a common approach to the taxation of excise duties on diesel used by road hauliers, in accordance with the objectives laid out in the Commission's White Paper on European Transport Policy for 2010 (see IP/01/1263). The aim is to present this proposal to the Commission before the summer.

The Commission's 1997 proposal for a Directive would progressively increase minimum rates of excise duty on mineral oil products and ensure minimum rates of taxation of coal, natural gas and electricity. At present only the excise duties charged on mineral oils are governed by a Community system of minimum taxation, the rates of which have not been revised since 1992. This immediately leads to distortions between the different sources of energy and between the Member States. For this reason, the Commission proposed that all energy products should be taxed, and that the rates for hydrocarbons should be updated. The flexibility contained in the proposal for a Directive would also enable the Member States to pursue environment and transport policy objectives and to restructure tax systems in favour of employment.

The Barcelona European Council in December 2001 asked to Council "in parallel with the agreement on the opening of the energy markets, to reach an agreement on the adoption of the energy tax directive by December 2002, bearing in mind the needs of professionals in the road-haulage industry". Savings taxation (JT)

Commissioner Bolkestein will discuss with Ministers the progress to date of negotiations with the United States, Switzerland, Liechtenstein, Monaco, Andorra and San Marino on the adoption of measures in those countries in order to allow effective taxation of savings income paid to EU residents. Mr. Bolkestein will be able to report some developments although it is a difficult process. He will emphasise the need for Member States to continue to provide the greatest possible political and technical support to the Commission in its work. He will welcome the Presidency's proposal, which the Council is due to consider, to send a letter to the US Secretary of the Treasury, Paul O' Neill, asking for active support for the negotiations between the Commission and the US.

The Council will also consider the state of play of the negotiations of the United Kingdom and the Netherlands with their dependent and associated territories (the Channel Islands, Isle of Man, and the dependent or associated territories in the Caribbean) to ensure the application of the same savings taxation measures as have been agreed within the EU.

The Council on 13 December 2001 gave its political agreement to the text of a Directive to ensure effective taxation of interest income from cross-border investment of savings paid to individuals within the Community as proposed by the Commission in July 2001 and amended by the High Level Group on Taxation on 7th December (see MEMO/01/439). Under the Directive, each Member State would ultimately be expected to provide information to other Member States on interest paid from that Member State to individual savers resident in those other Member States. But for a transitional period of seven years, Belgium, Luxembourg and Austria would apply a withholding tax instead of providing information, at a rate of 15% for the first three years and 20% for the remainder of the period.

The December 2001 Council agreed that the present draft Directive "represents the entirety of the provisions for the taxation of savings for the purpose of negotiating with the third countries" as requested by the Feira European Council in June 2000. At Feira Heads of State and Government requested that, in parallel with the discussions within the Community on the savings proposal, talks be initiated with key non-EU countries to ensure the adoption of equivalent measures in those countries in order to allow effective taxation of savings income paid to EU residents. The third countries in question are the United States, Switzerland, Liechtenstein, Monaco, Andorra and San Marino. The Commission has since had contacts with all the countries in question. A formal negotiating mandate was conferred on the Commission by the Council in October 2001 (see MEMO/01/330).

Under the timetables established at Feira and by the Council in July 2001, the Council should in June 2002 discuss and take note of the finalisation of the negotiations with the third countries. The Council should also take note of the results of parallel discussions between the United Kingdom and the Netherlands and their relevant dependent or associated territories to ensure the application of the same savings taxation measures there. The Council should then in the second half of 2002 decide, on the basis of a report presenting the outcome of the negotiations with the third countries and the dependent and associated territories, on a final text of the Directive no later than 31 December 2002, and do so unanimously. Postal Services Directive (JT)

[...]

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